Google and Facebook, The Duopoly

April 13, 2017

Even as digital ad spending takes off, the sharp divide between the haves and have-nots keeps increasing.

According to eMarketer, while U.S. digital ad spend will increase almost 16% this year, more than just about any other form of media, Google will account for more than 40% of U.S. digital ad revenue, and will bring in almost 80% of American search ad revenue. The eMarketer survey expects Google to reap over $28 billion in search revenue this year. The nearest competitor, Facebook, will get almost 40% of the U.S. display market, at over $16 billion.

Competitors like Snapchat are way behind, with an estimated 1.3% of the mobile ad market.

We have been doing this column for about a year now, and perhaps sometimes sound like a broken record, but we also don’t want to bury the lead. It’s hard to talk about a healthy digital ad market if two companies are so dominating it. Despite the recent controversy about extremist videos on Google’s YouTube, all indications are that most of the disaffected YouTube advertisers just shifted to Google search advertising, and Google lost very little revenue. They win again.

As someone who has covered media since the early ’80s, including the period when cable took off, I can truthfully say that no previous media form has ever been so lopsided. Back in the ’80s and early ’90s, one cable MSO, TCI, was very dominant in that field, but there were few who accused them of being anti-competitive or monopolistic. Or at least not to CEO John Malone’s face. He was just smarter than everybody else.

Is it the same now? Sort of. Everybody who watches the digital ad market seems to just accept Google’s dominance, as if it were pre-ordained. And, looking ahead, it is very hard to see any possible scenario under which Google screws up big-time. We are hardly the only ones to notice this. Back in January, Fortune magazine, noting that Google and Facebook accounted for 65% of the 2015 digital ad market, and 90% of the growth of that market. They called it a duopoly. We have made that point ourselves, several times.

Fortune quoted “venture investor” Fred Wilson, who predicted that "the ad-tech market will go the way of search, social, and mobile as investors and entrepreneurs concede that Google and Facebook have won and everyone else has lost. It will be nearly impossible to raise money for an online advertising business in 2017.”

We think that’s true. But the question is: Where do we go from here? Looking at what has transpired over the last year, I find this somewhat astonishing. With Donald Trump in the White House and eliminating Obama-era regulations every day, it’s difficult to see the new administration curtailing any of Google and Facebook’s advantages, even if they’re run by liberals who opposed him, actively.

No, 2017 will not see any significant change. It will be another year of Google and Facebook increasing their dominance, everyone else just fighting for table scraps, and all of us having to get used to the idea.

by John Motavalli, Columnist
John Motavalli, Freelance, MediaPost
Courtesy of mediapost